BP Energy Outlook 2035 Seems Conservative – Oil and Renewables Alike!

Usually when you see a 2030 or 2040 projection from an energy company, you would probably expect for the company making the presentation to be talking up their own book. So what happens when a company such as BP PLC (NYSE: BP) comes out with an outlook to the year 2035 that actually signals a slowing down of the growth in global energy demand?

BP’s prediction of slowing demand growth is despite the increases being driven by the world’s emerging economies. BP’s outlook to 2035 is taking a clear focus on supply sufficiency, security and sustainability. Growth in demand is currently being led by China and India.

The new Outlook 2035 projects that global energy consumption will rise by 41% from 2012 to 2035. By comparison, that growth was 55% over the last 23 years and 30% over the last ten years. Some 95% of that growth will come from emerging markets. Advanced economies such as North America, Europe and developed Asia will grow much more slowly, and that demand is even expected to decline in the later years of the forecast period.

Don’t think that gasoline, natural, and even coal, are on their way out here. BP said,

“Shares of the major fossil fuels are converging with oil, natural gas and coal each expected to make up around 27% of the total mix by 2035 and the remaining share coming from nuclear, hydroelectricity and renewables. Among fossil fuels, gas is growing fastest, increasingly being used as a cleaner alternative to coal for power generation as well as in other sectors.”

BP’s three concerns are around ample supplies, security and sustainability.

Global carbon dioxide emissions are projected to rise by 29%, with all of the growth coming from the emerging economies. The outlook does note that emissions growth is expected to slow as natural gas and renewables gain market share from coal and oil. BP also believes that emissions are expected to decline in Europe and the US. BP is also maintaining that CO2 emissions in the US are back at 1990s’ levels.

The Outlook shows global energy demand continuing to increase at an average of 1.5% a year to 2035. This is broken down as 2% a year to 2020, followed by 1.2% per year from then to 2035. By 2035, energy use in the non-OECD economies is expected to be 69% higher than in 2012.

BP does see oil remaining the key driver here even if the fuel mix is evolving. The key focus of the outlook is that fossil fuels will continue to be dominant. BP said, “Oil, gas and coal are expected to converge on market shares of around 26% to 27% each by 2035, and non-fossil fuels – nuclear, hydro and renewables – on a share of around 5% to 7% each.”

Oil is expected to be the slowest growing of the major fuels to 2035 at only 0.8% annual growth. This should create demand for oil and other liquid fuels being nearly 19 million barrels a day higher in 2035 compared to 2012.

BP confirms what other industry sources project as well – the United States is overtaking Saudi Arabia as the world’s largest producer of liquids in 2014. At the same time, US oil imports are expected to fall nearly 75% between 2012 and 2035.

Natural gas is expected to be the fastest growing of the fossil fuels at 1.9% per year, with non-OECD countries being 78% of demand growth. Shale gas supplies are expected to meet 46% of the growth, as well as accounting for 21% of world gas and 68% of US gas production by 2035.

Coal is the big wild card. It may seem to be a dying industry in the United States to readers, but BP is suggesting that coal will still grow. This is still expected to be the slowest growing major fuel at only 1.1% per year to 2035. That growth is also front-end loaded as the growth is expected to drop down to only 0.6% per year after 2020. Some 87% of that demand growth is being tied to China and India.

Then there is the “Other” category of energy demand…

Nuclear energy output is expected to rise to 2035 at around 1.9% a year, with 96% coming from needs of China, India and Russia. Nuclear output is expected to decline in the US and in Europe.

Hydroelectric power growth is expected to be 1.8% per year to 2035, – almost half from China, India and Brazil.

Renewables should continue to be the fastest growing class of energy – growth is targeted at 6.4% per year to 2035. Another boost is that renewable energy should rise from 5% of total energy use up to 14% by the year 2035. The non-OECD nations are expected to account for 45% of the total by 2035.

Including biofuels, renewables are expected to have a higher share of primary energy than nuclear by 2025.

All in all, this seems like a fairly conservative projection for two decades out when you consider that it is coming from an oil and gas company. It sounds huge that renewable energy demand will grow almost 200% over the next two decades, but it also leaves a stark outlook for the next generation – only 14% of global energy use is projected to be from renewables even by 2035.